Gerard Klauer downgraded Circuit City Group (CC) to neutral from buy. The electronics retailer warned Friday that its January and February sales were below estimates. The company sees EPS of $0.70-$0.74 in the fourth quarter and $0.89-$0.93 in fiscal year 2002.
Analyst Scot Ciccarelli says that while fourth quarter EPS is still expected to be $0.68-$0.71, comp store sales will fall slightly below expectations. He notes it now looks as if fiscal year 2003 (ending February) EPS will be heavily impacted by remodeling costs. He says $130 million in remodeling and relocation expenditures will reduce fiscal year 2003 EPS by about $0.18, so he sees $0.57-$0.67 total EPS, well below his $0.85 estimate (excluding KMX). He believes the stock will come under severe selling pressure today on the news.